Income Tax Severed Letters - 1999-01-08

Miscellaneous

14 December 1998 Miscellaneous E9826898.txt - CLERGYMAN'S RESIDENCE

Unedited CRA Tags
8(1)(c)

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

XXXXXXXXXX

Dear XXXXXXXXXX:

Thank you for your letter of September 23, 1998, regarding your constituent’s concerns that Revenue Canada wants to change the clergyman’s residence deduction and restrict the kinds of donations that qualify for a charitable tax credit.

9 December 1998 Miscellaneous E9829820.txt - PART I.3 - PARTNERSHIP EARNINGS

Unedited CRA Tags
181(3) 181.2(3)

Principal Issues:
Treatment of undistributed partnership income for the fiscal period of the partnership that ends in the corporate partner’s taxation year as well as the treatment of distributions of current earnings to the corporate partner in the period that begins after the end of the partnership’s fiscal period but before the end of the corporate partner’s taxation year for Part I.3 purposes.

Position:
If such amounts are credited to the corporate partner’s retained earnings in accordance with GAAP, it is our view that such amounts would be included in the corporate partner’s taxable capital.

Reasons:
Legislation.

1 December 1998 Miscellaneous E9829850.txt - PARTICIPATING PAYMENTS - INTEREST

Unedited CRA Tags
20(1)(c) 212(1)(b)

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Tax Executive Conference

Question XVII Participating Payments - Interest

Question

1 December 1998 Miscellaneous E9830080.txt - SAME-SEX PARTNERS, RPPS

Unedited CRA Tags
147.1

Principal Issues: Current position re pension benefits provided to same-sex spouses.

Position: Adhere to Rosenberg Decision.

Reasons: Effective April 23, 1998, Revenue Canada will register pension plans that provide survivor benefits for same-sex partners.

19 November 1998 Miscellaneous E9829940.txt - 1998 TEI CONFERENCE - SHELL CANADA

Unedited CRA Tags
245

Principal Issues: Department's position on Kiwi Loans following Shell Canada cas at Federal Court

Position: Will consider application of GAAR in future

Reasons: Avoidance Transaction

Ruling

30 November 1997 Ruling 9728513 - ISSUE OF UNITS

Unedited CRA Tags
20(1)(c) 20(1)(e) 212(1)(b)(vii)

Principal Issues:

1) Interest deductible on borrowing to make a reduction of capital
2) Interest deductible on borrowing used to make the Payment
3) The unit is issued for an amount equal to the Principal Amount and no proceeds are allocated to the Warrant
4) The payment will be deductible pursuant to 20(1)(e)(ii)
5) The interest payable by ACo to non-residents of with whom ACo deals at arm's length will be exempt from 212(1)(b) of the Act
6) Subsection 214(15) will not apply to the Payment
7) GAAR will not apply

Position:

1) Borrowing OK to the extent of paid-in capital
2) OK incurred to earn income
3) The Unit is issued for an amount equal to the Principal amount and no proceeds allocated to the Warrant
4) The Payment will be deductible pursuant to 20(1)(e)(ii)
5) OK
6) OK
7) GAAR will not apply

Reasons:

30 November 1997 Ruling 9813673 - REORGANIZATION

Unedited CRA Tags
55(3)(b)

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

XXXXXXXXXX
XXXXXXXXXX 3-981367
XXXXXXXXXX

Attention: XXXXXXXXXX

XXXXXXXXXX, 1998

Dear Sirs:

Re: Advance Income Tax Ruling
XXXXXXXXXX
XXXXXXXXXX

30 November 1996 Ruling 9620953 - SPLITOFF TO RELATED CORPORATION

Unedited CRA Tags
55(3)(a)

Principal Issues:

Whether redemption of preferred shares held by public shareholders is exempted pursuant to paragraph 55(3)(a) from application of subsection 55(2).

Position:

Yes

Reasons:

30 November 1996 Ruling 9704023 - SUBSTANTIAL ISSUER BID

Unedited CRA Tags
55(2) 55(3)(a)

Principal Issues:

Application of paragraph 55(3)(a) - significant increase in interest.

Position:

In these circumstances increase not significant.

Reasons:

30 November 1996 Ruling 9708443 - SHARE REPURCHASE

Unedited CRA Tags
55(3)(a) 55(2)

Principal Issues:

Does property include money for the purposes of paragraph 55(3)(a).

Position:

Not in these circumstances.

Reasons:

30 November 1996 Ruling 9710843 - NORMAL COURSE ISSUER BID RULING

Unedited CRA Tags
84(6) 183.1 55(3)(a)

Principal Issues:

1) Will subsection 84(6) apply to preclude the application of subsection 84(3) on the purchase for cancellation by Canco of its common shares from the minority shareholders pursuant to the normal course issuer bid?

2) Do the purchases by Canco of its common shares held by Holdco taint the application of subsection 84(6) with respect to the purchases of the common shares from the minority shareholders?

3) Will Part II.1 be applicable to the proposed transactions?

4) Does paragraph 55(3)(a), current and proposed, preclude the application of subsection 55(2) to the dividends received by Holdco?

Position: Yes. No. No. Yes.

Reasons:

30 November 1996 Ruling 9727413 - XXXXXXXXXX BUTTERFLY (SPIN-OFF)

Unedited CRA Tags
55(3)(b)

Principal Issues:

This was a "spin-off" net-equity consolidated look-through butterfly. The distributing corporation rolled the assets of a particular division into a new subsidiary ("New Subco") and then butterflied the shares of New Subco to a Newco.

Position:

There were several property classification issues and consolidated look-through issues consistent with these type of butterflies.

Reasons:

Technical Interpretation - External

5 January 1999 External T.I. 9819345 - PAYMENTS BASED ON FUTURE PROFIT - RA?

Unedited CRA Tags
248(1) 60(j.1)

Principal Issues:

Could amounts computed by reference to the employer’s eventual profits and payable to an employee on a periodic basis, for a certain period of time after the employee’s retirement, be considered a retiring allowance?

Position: Probably not.

Reasons:

4 January 1999 External T.I. 9830195 - 147.4(1), LIF, RPP TRANSFER

Unedited CRA Tags
147.4(1)

Principal Issues: Does section 147.4 apply to amounts transferred from a RPP to a LIF?

Position: No.

Reasons: Our understanding of LIFs is that they are RRIFs with additional requirements imposed by provincial legislation. Section 147.4 only applies in respect of RPP annuities.

4 January 1999 External T.I. 9821225 - TRANSFER OF LIFE INSURANCE POLICY

Unedited CRA Tags
148(8.2)

Principal Issues:

Tax reporting of a disposition of an interest in a life insurance policy on the death of the policyholder.

Position:

Provided general comments on T5 reporting and the rollover treatment provided in subsection 148(8.2) where the policy is transferred to the policyholder’s spouse as a consequence of death.

Reasons:

4 January 1999 External T.I. E9824715 - R/A, INSTALLMENTS

Unedited CRA Tags
60(j.1)

Principal Issues: Can a retiring allowance be paid in installments where the employee is solely responsible for choosing the installment payment option?

Position: Yes.

Reasons: Paragraph 8 of IT-337R3 confirms our general position.

4 January 1999 External T.I. 9817575 - FOREIGN PENSION PLANS

Unedited CRA Tags
8(1)(m) 118.7 Cda.-U.K. Treaty

Principal Issues: Deductibility of contributions to a foreign pension plan by a Canadian resident

Position: Not deductible for Canadian income tax purposes.

Reasons: Nothing in the Act to allow the deduction and (in this case) the Canada-U.K. Treaty provides no relief.

4 January 1999 External T.I. 9824715 - R/A, INSTALLMENTS

Unedited CRA Tags
60(j.1)

Principal Issues: Can a retiring allowance be paid in installments where the employee is solely responsible for choosing the installment payment option?

Position: Yes.

Reasons: Paragraph 8 of IT-337R3 confirms our general position.

31 December 1998 External T.I. 9830615 - SELF DIRECTED RRSP - REG 4900(12)

Unedited CRA Tags
4900(12) 4901(2.2) 4900(13)

Principal Issues: Whether a share of a corporation is a qualified investment by virtue of Regulation 4900(12)?

Position: We do not know. General information provided.

Reasons: Question of fact.

24 December 1998 External T.I. 9833695 - XXXXXXXXXX SPIN-OFF

Unedited CRA Tags
90

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

XXXXXXXXXX 		983369

December 24, 1998

Dear XXXXXXXXXX:

We are writing in response to your letter received on December 23, 1998 concerning the tax consequences to Canadian shareholders as a result of the 1998 spin-off or distribution by XXXXXXXXXX of its subsidiary XXXXXXXXXX.

24 December 1998 External T.I. 9820115 - RETIRING ALLOWANCE - ROLLOVER TO RRSP

Unedited CRA Tags
60(J.1)

Principal Issues:
1. Would previous years of employment be considered for purposes of 60(j.1) calculation.

2. Would an amount paid by a wound-up subsidiary (under subsection 88(1)) to an employee whose employment has continued with the parent corporation be considered a retiring allowance.

Position:
1. Yes, subject to 60(j.1)(ii)(C)
2. No.

Reasons: Wording of legislation.

23 December 1998 External T.I. 9809615 - CHARITABLE FOUNDATION - DISBURSEMENT QUOTA

Unedited CRA Tags
149.1

Principal Issues: Whether a loss on the disposition of marketable securites would be considered an amount expended on charitable activities.

Position: No

Reasons: Meaning of "expended" considerering they were acquired by way of gift.

23 December 1998 External T.I. 9817135 - PRE-PRODUCTION REVENUE; BULK SAMPLE

Unedited CRA Tags
66(12.1)

Principal Issues: treatment of bulk sample revenue

Position: reduces CCEE

Reasons: 66(12.1)

22 December 1998 External T.I. E9828245 - FAMILY FARM CORPORATION

Unedited CRA Tags
70(10)

Principal Issues: Whether farm land could be considered as non-farm use if more than 50% of its fair market value is derived from mineral rights or oil surface rights/leases.

Position: Yes.

Reasons: The definition of "share of the capital stock of a family farm corporation" in subsection 70(10) of the Act only includes "property that has been used ... principally in the course of carrying on the business of farming in Canada".

22 December 1998 External T.I. 9828245 - FAMILY FARM CORPORATION

Unedited CRA Tags
70(10)

Principal Issues: Whether farm land could be considered as non-farm use if more than 50% of its fair market value is derived from mineral rights or oil surface rights/leases.

Position: Yes.

Reasons: The definition of "share of the capital stock of a family farm corporation" in subsection 70(10) of the Act only includes "property that has been used ... principally in the course of carrying on the business of farming in Canada".

22 December 1998 External T.I. 9818185 - ROTH IRA, CANADIAN TAX ISSUES

Principal Issues: What are the tax consequences where a resident of Canada converts an IRA to a Roth IRA under the new amendments to the Internal Revenue Code?

Position: Discussion of several issues.

Reasons: We look at current taxation and future taxation issues relating to the transfer, income and future withdrawals from a Roth IRA.

22 December 1998 External T.I. 9831675 - ROTH IRA, CANADIAN TAX ISSUES

Principal Issues:

How will Roth IRAs be treated for tax purposes in Canada?

Position:

Questions and Answers provided.

Reasons:

21 December 1998 External T.I. 9830115 - RESIDENT RECEIVING ROYALTY INCOME

Unedited CRA Tags
3(a)

Principal Issues: Are royalty or royalty-like revenues received by a Canadian resident taxable ?

Position: YES,

Reasons: A Canadian resident pays income tax on his world-wide income

21 December 1998 External T.I. 9823585 - LICENSE - EXECUTIVE SUITE AT A SPORTS BLDG.

Unedited CRA Tags
Reg. Schedule II Class 14 67.1(1) 67.1(2)

Principal Issues: Whether the cost of a license for an executive suite at a sports facility is deductible for tax purposes in 4 different scenarios: (i) The licensee entertains clients at all events (i.e., concerts, hockey games, etc.) available at the sports facility. (ii) The licensee entertains clients at only 3/4 of the events available at the sports facility. The remainder of the events are attended by the employees of the specific organization for reward and recognition purposes. (iii) The licensee obtains the use of an executive suite at the sports facility for the sole benefit of their employees for reward and recognition purposes. (iv) The licensee entertains clients only 3/4 of the time at the executive suite. The remainder of the time, the executive suite is used as a meeting room (or additional office space) for business purposes.

Position: In general terms, a license for a limited period qualifies as a class 14 asset and hence its cost should be apportioned over the life of the license. Further, such cost is restricted to 50% of the CCA otherwise determined by virtue of 67.1(1). An exception occurs, however, where the executive suite is used to entertain employees such that the employees are in receipt of a taxable benefit. In this case the 50% restriction does not apply owing to the exception in subsection 67.1(2). As regards the use of an executive suite as a meeting room, we are of the view that not much of the cost of the executive suite can be attributed to such a use.

Reasons: A license is included in the definition of “class 14.” The cost of a private box at a sports facility is considered entertainment.

21 December 1998 External T.I. 9821615 - TRAVEL ALLOWANCES

Unedited CRA Tags
6(1)(b)(vii,1)

Principal Issues:
1) Is a vehicle allowance paid to an employee (based on kilometers travelled from office to work site) who travels from home and reports every morning and evening for clerical and management purposes at the office after returning from the work site non-taxable ?

2) Is a vehicle allowance paid to an employee(based on kilometers travelled from office to work site) who travels from home to the office to fuel a machine located at the work site .

Position:
1) Amount may likely qualify as a non-taxable allowance

2) Amount is generally taxable but there may be a non-taxable portion with regards to the travel from home to office,

Reasons:

21 December 1998 External T.I. E9830115 - RESIDENT RECEIVING ROYALTY INCOME

Unedited CRA Tags
3(a)

Principal Issues: Are royalty or royalty-like revenues received by a Canadian resident taxable ?

Position: YES,

Reasons: A Canadian resident pays income tax on his world-wide income

21 December 1998 External T.I. 9805755 - PART XIII TAX LIABILITY WITH OR WITHOUT AGENT

Unedited CRA Tags
215(6) 215(1) 215(3)

Principal Issues: Whether a Canadian taxpayer who pays timber royalties to a non-resident’s agent without deducting and remitting Part XIII tax may be liable for Part XIII tax where the non-resident's agent fails to remit Part XIII tax to the Receiver General?

Position: Yes, even though assessments will normally be raised by the Department against the agent, in case of non compliance, the Canadian taxpayer may be assessed under subsections 215(1) and (6) of the Act, in certain situations.

Reasons: Precedent in Curragh Inc. v. Her Majesty the Queen, 94 DTC 1894 (TCC).

18 December 1998 External T.I. 9803745 F - ALLOCATION DE FIN DE CARRIÈRE - IMPOSITION

Unedited CRA Tags
12(1)x) R2600(2) R2601(1)

Principales Questions:

Dans quelle province devra-t-on imposer l'allocation de fin de carrière reçue par un médecin du Québec qui est résident de l'Ontario à la fin de l'année.

Position Adoptée:

18 December 1998 External T.I. E9829185 - CHILD SUPPORT

Unedited CRA Tags
56.1(4) 56(1)(b) 60(b)

Principal Issues:

1. Whether a “commencement day” as defined in subsection 56.1(4) of the Act would be triggered in respect of a new court order or a variation of a pre-May 1997 court order that introduces a provision stipulating when child support amounts payable are to cease in respect of the children of the marriage.

2. If the payer makes payments once a year directly to the children for their university tuition, would this amount be considered child support and would the payments be taxable and deductible?

Position:

1. Question of fact that depends on the wording of the new court order or variation of the pre-May 1997 court order but likely that a commencement day would be triggered.

2. No, payments made pursuant to a court order that are made directly to the taxpayer’s children for their university education would not meet the definition of “support amount” as defined in subsection 56.1(4) of the Act. It is also unlikely that subsection 60.1(1) of the Act would apply as the children, once they reach the age of majority, would not be considered to be in the custody of their mother and accordingly, one could not argue that the payments made directly to the payer’s adult children are for the benefit of their mother.

Reasons:

18 December 1998 External T.I. 9827925 - TUITION TAX CREDIT, EDUCATION TAX CREDIT

Unedited CRA Tags
118.5(1) 118.6(1) 118.6(2)

Principal Issues: Various questions related to the completion of Form T2202A, Tuition and Education Amounts Certificate.

Position: See questions and answers in our response.

Reasons: See Rulings file # 971711, 951676, 930195, 961018, 910602

18 December 1998 External T.I. 9829185 - CHILD SUPPORT

Unedited CRA Tags
56.1(4) 56(1)(b) 60(b)

Principal Issues:

1. Whether a “commencement day” as defined in subsection 56.1(4) of the Act would be triggered in respect of a new court order or a variation of a pre-May 1997 court order that introduces a provision stipulating when child support amounts payable are to cease in respect of the children of the marriage.

2. If the payer makes payments once a year directly to the children for their university tuition, would this amount be considered child support and would the payments be taxable and deductible?

Position:

1. Question of fact that depends on the wording of the new court order or variation of the pre-May 1997 court order but likely that a commencement day would be triggered.

2. No, payments made pursuant to a court order that are made directly to the taxpayer’s children for their university education would not meet the definition of “support amount” as defined in subsection 56.1(4) of the Act. It is also unlikely that subsection 60.1(1) of the Act would apply as the children, once they reach the age of majority, would not be considered to be in the custody of their mother and accordingly, one could not argue that the payments made directly to the payer’s adult children are for the benefit of their mother.

Reasons:

18 December 1998 External T.I. E9827925 - TUITION TAX CREDIT, EDUCATION TAX CREDIT

Unedited CRA Tags
118.5(1) 118.6(1) 118.6(2)

Principal Issues: Various questions related to the completion of Form T2202A, Tuition and Education Amounts Certificate.

Position: See questions and answers in our response.

Reasons: See Rulings file # 971711, 951676, 930195, 961018, 910602

17 December 1998 External T.I. 9825265 - TAXATION OF PAYMENTS MADE BY REG. CHARITIES

Unedited CRA Tags
56(1)(U)

Principal Issues: Taxation of payments made to individuals by charitable organizations.

Position: Taxable as social assistance under paragraph 56(1)(u).

Reasons: Since the payments are made “on the basis of a means, needs or income test”, the payments made by the charitable organizations would be considered social assistance for purposes of paragraph 56(1)(u) of the Act. Amounts reportable on form T5007 subject to certain exemptions.

17 December 1998 External T.I. 9810095 F - ACTIONS ADMISSIBLES DE PETITE ENTREPRISE

Unedited CRA Tags
110.6(1) 251(2)c) 251(5)b)(i)

Principales Questions:
Peut-on considérer un revenu de location comme revenu d'entreprise exploitée activement pour les fins de 110.6? (Le paragraphe 129(6) répute un revenu d'entreprise exploitée activement pour les fins de l'article 125)

Position Adoptée:
Non. Le paragraphe 129(6) de la Loi a une portée bien définie et ne s'applique pas à l'article 110.6 de la Loi. Cependant, la définition de «action admissible de petite entreprise» au paragraphe 110.6(1) de la Loi pourrait s'appliquer si l'actif loué est utilisé dans une entreprise qu'une société liée exploite activement.

17 December 1998 External T.I. 9830365 - SALE OF STANDING TIMBER

Unedited CRA Tags
9 110.6(2)

Principal Issues:

Whether the sale of standing timber is on account of income or capital.

Position:

It is a question of fact that is usually determined on a prospective basis.

Reasons:

17 December 1998 External T.I. 9810105 F - PERTE AU TITRE D'UN PLACEMENT D'ENTREPRISE

Unedited CRA Tags
39(1)c) 40(2)g)(ii) 54 50(1)a)

Principales Questions:

1. Une créance, entre deux personnes qui ne transigeaient pas à distance, radiée au cours de l'année peut-elle faire l'objet d'une perte au titre d'un placement d'entreprise?
2. Les règles des pertes apparentes s'appliquent-elles dans une situation de radiation de créance?

Position Adoptée:

17 December 1998 External T.I. E9825265 - TAXATION OF PAYMENTS MADE BY REG. CHARITIES

Unedited CRA Tags
56(1)(U)

Principal Issues: Taxation of payments made to individuals by charitable organizations.

Position: Taxable as social assistance under paragraph 56(1)(u).

Reasons: Since the payments are made “on the basis of a means, needs or income test”, the payments made by the charitable organizations would be considered social assistance for purposes of paragraph 56(1)(u) of the Act. Amounts reportable on form T5007 subject to certain exemptions.

17 December 1998 External T.I. 9829565 F - ÉMISSION D'ACTION - 4900(12)

Unedited CRA Tags
reg 4900(12)

Position Adoptée:

17 December 1998 External T.I. 9832965 - RET. ALL. LEAVE OF ABSENCE

Unedited CRA Tags
248(1)

Principal Issues: Could an employee take a leave of absence before retiring to reduce pension reduction and receive a retiring allowance during the leave period?

Position: No

Reasons: A person is generally employed while on leave and the agreement between the employer and employee states the exact retirement date.

15 December 1998 External T.I. 9819355 - FOREIGN AFFILIATES - FOREIGN ACCRUAL TAX

Unedited CRA Tags
95(1) 91(4)
U.S. tax on sale of replacement property viewed as tax on gain deferred on sale (triggering FAPI) of predecessor property

Principal Issues: Where FAPI arises as a result of a disposition by a foreign affiliate but foreign tax in respect of that disposition is deferred a result of a roll-over under foreign law, may foreign tax arising as a result of a gain on the disposition of the consideration received by the foreign affiliate on the original transaction qualify as foreign accrual tax?

Position: Question of fact - the foreign tax may qualify.

Reasons: The definition of foreign accrual tax is very broad but it would be necessary to review the details of an actual case in order to make a definitive determination.

15 December 1998 External T.I. E9824645 - CAPITAL DIVIDEND ACCOUNT

Unedited CRA Tags
89(1)(d) 245(2)

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

XXXXXXXXXX 							982464

Attention: XXXXXXXXXX

December 15, 1998

Dear Sirs:

15 December 1998 External T.I. 9824645 - CAPITAL DIVIDEND ACCOUNT

Unedited CRA Tags
89(1)(d) 245(2)

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

XXXXXXXXXX 							982464

Attention: XXXXXXXXXX

December 15, 1998

Dear Sirs:

15 December 1998 External T.I. 9821955 - PRINCIPAL RESIDENCE

Unedited CRA Tags
54

Principal Issues:

1. What portion of a 4.88 acre property qualifies as a principal residence for purposes of the principal residence capital gains exemption under paragraph 40(2)(b)of the Income Tax Act?
2. Do the log cabins (located on the 4.88 acre) in which the taxpayer lived for two years during the construction of a house close to the cabins qualify as a principal residence under the definition of this term in section 54 of the Act?
3. When the taxpayer, after moving from the cabins into the house, started renting the cabins, was there a deemed disposition of the cabins under subsection 45(1) of the Act?
4. Is the election under subsection 45(2) of the Act available in respect of the cabins?

Position:

1. Question of fact. Taxpayer referred to the TSO. General comments provided in respect of land in excess of 1/2 acre. Notwithstanding the existence of a minimum lot size restriction at acquisition, if severance could be obtained by application to authorities, the severable portion is not part of the residence: see section 16 of proposed IT-120R5. General comments also included for land of 1/2 acre or less because of the taxpayer's rough diagram locating the house at one end of the property (with road access), the taxpayer's statement that the "the house takes up some of the land where the cabins are", and the fact that the cabins are rented. Land used to earn income (from business or property) is generally considered not to be necessary for the use and enjoyment of the housing unit as a residence: see section 14 of proposed IT-120R5.
2. Yes, the cabins may qualify as a principal residence, if so designated.
3. Yes, a deemed disposition did occur.
4. Yes, the election under subsection 45(2) is available.

Reasons: IT-120R4 and proposed IT-120R5.

14 December 1998 External T.I. 9820255 - TAXATION OF REINSURANCE BUSINESS

Unedited CRA Tags
138

Principal Issues: How reinsurance is treated in terms of federal income tax in Canada for resident and non-resident insurers.

Position: General description of taxation of insurers under the Income Tax Act.

Reasons: The Act does not distinguish between insurers and reinsurers.

10 December 1998 External T.I. 9822465 - INVESTMENT CORPORATIONS

Unedited CRA Tags
130(3)(a)(vii)

Principal Issues: Whether dividends paid under a dividend reinvestment plan are dividends received in the form of shares or other securities for purposes of subparagraph 130(3)(a)(viii).

Position: No, unless terms of plan provide for payment of dividends in kind.

Reasons: 130(3)(a)(viii) only provides for a deduction of dividends in-kind and not shares acquired with the proceeds of the dividend.

27 November 1998 External T.I. E9829245 - MEDICAL EXPENSES

Unedited CRA Tags
118.2(2)

Principal Issues: Are fees paid to therapist who are members of the Ontario Association for Marriage and Family Therapy, members of the American Association of Marriage and Family Therapy, members of Canadian Association of Psychoanalytic Child Therapist, and members of the Canadian Association for Child and Play Therapy qualify as medical expenses ?

Position: Yes, since they are members of an association governing their particular profession, work in recognized clinics, hospitals and provide a treatment at the request of or in association with a medical practitioner.

Reasons: Review of documentation - prior position dealing with social workers

27 November 1998 External T.I. 9829245 - MEDICAL EXPENSES

Unedited CRA Tags
118.2(2)

Principal Issues: Are fees paid to therapist who are members of the Ontario Association for Marriage and Family Therapy, members of the American Association of Marriage and Family Therapy, members of Canadian Association of Psychoanalytic Child Therapist, and members of the Canadian Association for Child and Play Therapy qualify as medical expenses ?

Position: Yes, since they are members of an association governing their particular profession, work in recognized clinics, hospitals and provide a treatment at the request of or in association with a medical practitioner.

Reasons: Review of documentation - prior position dealing with social workers

20 November 1998 External T.I. 9802725 - VERTICAL AMALGAMATION

Unedited CRA Tags
87(2.11)

Principal Issues:

Whether 87(2.11) applies to 2 hypothetical situations.

Position:

It applies in Situation 1 but only to reduce the taxable income of ACo
It does not apply in Situation 2

Reasons:

5 November 1998 External T.I. 9821655 - RELOCATION EXPENSES EMPLOYEE

Unedited CRA Tags
6(1)(a)

Principal Issues: tax treatment of relocation payment related to cost of maintaining two residences, when old residence has not sold

Position: payment fully taxable if non-accountable allowance; if reimbursement of specific expenses, payments related to temporary accomodation or carrying costs of old residence while actively trying to sell, amounts are not taxable benefit. Other amounts are taxable.

Reasons: Per Employer Guide to Source deductions, certain expenses non-taxable if paid or a reimbursement.

4 November 1998 External T.I. 9805795 - AMALGAMATION

Unedited CRA Tags
87(2)(e.1) 40(3.1)

Principal Issues:

The interaction of subsections 87(2)(e.1), 88(1)(e.2) and 40(3.1) where a subsidiary which holds a partnership interest which is an excluded interest is wound-up into its parent.

Position:

The winding-up should not result in the application of 40(3.1).

Reasons:

4 November 1998 External T.I. 9642215 - INTERACTION OF 85(1) AND 70(3)

Unedited CRA Tags
85(1) 70(3)

Principal Issues: Whether subsection 85(1) overrides the applicablitliy of subsection 70(3).

Position: No

Reasons: Subsection 85(1) deems the proceeds of disposition to be a certain amount whereas subsection 70(3) taxes the amount received.

30 October 1998 External T.I. 9822655 - TUITION TAX CREDIT

Unedited CRA Tags
118.5

Principal Issues: First year business may study their curriculum by enrolling in theXXXXXXXXXX rather than using traditional methods. A student who is enrolled in theXXXXXXXXXX will be provided with a laptop computer that must be returned at the end of the academic year. In connection with computer, the student must pay a technology fee of $XXXXXXXXXX each semester. Does the technology fee qualify for the tuition tax credit?

Position: Yes

Reasons: The position is consistent with the Department’s position in paragraph 26(I) of IT 516R2.

28 October 1998 External T.I. E9824835 - RESIDENCE OF A TRUST

Unedited CRA Tags
250

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

XXXXXXXXXX 	982483
		Tim Kuss
Attention:  XXXXXXXXXX 

October 28, 1998

Dear Sirs:

Re: XXXXXXXXXX (the "Estate")

28 October 1998 External T.I. 9824835 - RESIDENCE OF A TRUST

Unedited CRA Tags
250

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

XXXXXXXXXX 	982483
		Tim Kuss
Attention:  XXXXXXXXXX 

October 28, 1998

Dear Sirs:

Re: XXXXXXXXXX (the "Estate")

15 October 1998 External T.I. 9822665 - PREJUDGMENT INTEREST AND PERSONAL DAMAGES

Unedited CRA Tags
12(1)(c)

Principal Issues: We have been asked about our position on the meaning of “post-judgment” interest in relation to a personal damages settlement by a person who lives in Australia. On the basis of the information in the letter, there are no Canadian tax consequences.

Position: Some general comments were provided.

Reasons: See principal issues

7 October 1998 External T.I. 9803725 - REPLACEMENT PROPERTY RULES

Unedited CRA Tags
248(1) 251(2)(a)(i)

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

XXXXXXXXXX 980372
B. Kerr
Attention: XXXXXXXXXX

October 7, 1998

Dear Sirs:

Re: Replacement Property Rules

This is in response to your letter of January 19, 1998, concerning the application of the replacement property rules.

23 September 1998 External T.I. 9824455 - METIS CITIZENS RECEIVING EMPLOYMENT TRAINING

Unedited CRA Tags
56(1)(r)

Principal Issues: Correction of technical interpretation #E9727895. Taxation
of training benefits being received by Metis and funding is section 63 of the EI Act.

Position: These payments are taxable regardless of whether they relate to a course or program designed to facilitate the re-entry into the labour force.

Reasons: These payments are taxable under paragraph 56(1)(r) which was introduced in Bill C-28 and received royal assent on June 18, 1998. Paragraph 56(1)(r) of the Act subjects to tax various training-related amounts. Specifically, this paragraph includes in a taxpayer’s income financial assistance received under part II of the Employment Insurance Act, as well as similar financial assistance received from a government or government agency under the terms of an agreement with the Canada Employment Insurance Commission.

17 September 1998 External T.I. 9820955 F - APFF - QUESTION 24 - SOCIÉTÉ DE PERSONNES

Unedited CRA Tags
96(1)f) 112(1)

Principales Questions: l'existence du patrimoine distinct prévue par le Code civil du Québec affecte-t-il l'application des dispositions prévues a 96(1)f) et 112(1)

Position Adoptée: non

6 July 1998 External T.I. 9805815 - RIGHT OF FIRST REFUSAL - RETIRING ALLOWANCE

Unedited CRA Tags
248(1)

Principal Issues:

Whether a “right of first refusal” after an employee is terminated would disqualify a payment from being considered a retiring allowance.

Position:

The “right of first refusal” will generally not, in and of itself, disqualify payments which would otherwise qualify as a retiring allowance from being considered as such.

Reasons:

12 June 1998 External T.I. 9705585 - CEMETERY CARE TRUST AND EFA

Unedited CRA Tags
148.1

Principal Issues:

Income tax reporting when payments are made to the qualifying person out of an EFA

Position:

T5 slips may be required to be issued pursuant to paragraph 201(1)(b) of the Regulations.
No T5 slips when a CCT is involved.

Reasons:

29 May 1998 External T.I. 9809385 F - IT-293R - PARAGRAPHES 25 ET 26

Unedited CRA Tags
80

Principales Questions:

Est-ce que les commentaires du Ministère aux pararagraphes 25 et 26 du Bulletin d’interprétation IT-293R sont toujours pertinents?

Position Adoptée: Oui.

28 May 1998 External T.I. 9804635 - ALLOWABLE USE OF OPTIONS IN RRP

Unedited CRA Tags
4900(1)(e)

Principal Issues: Are the following options qualified investment for purposes of RRSP or RRIF?
Equity Spread;
Index Options;
Put Options;
Covered Call Options;
Call Options;

Position:
Not applicable;
No;
No: cash received on writing a put option may be qualified;
Yes: cash received on writing a call option may be qualified;
Yes;

Reasons:
Spread is a strategy, not an investment;
Do not always give right to cash and as such do not meet the definition;
A Put is not a right to acquire property. Cash qualifies;
Cash qualifies;
Qualifies if listed and underlying property is qualified.

Conference

19 November 1998 Roundtable, E9824666 - PENSION PLAN EMPLOYERS - SECTION 251

Unedited CRA Tags
251(1)

Principal Issues: Would a municipality be dealing at arm’s length with a corporation that is owned jointly by the municipality and other municipalities for purposes of 8503(3)(b).

Position: Possibly.

Reasons: Analysis of legislation and statutory documentation.

6 November 1998 Roundtable, E9825006 - REIMBURSEMENT OF PENSION CONTRIBUTIONS

Unedited CRA Tags
6

Principal Issues:

In a particular situation if employees take a leave of absence, the employees are required to pay the employer’s share of RPP contributions but are subsequently reimbursed by the employer. Are the reimbursements by the employer treated as taxable benefits?

Position:

In general, yes.

Reasons:

25 November 1998 CTF Roundtable, 9823880 - CTF - TAX CASES - SHERWAY CENTRE

Unedited CRA Tags
20(1)(c) 20(1)(e)

Principal Issues: Impact of Sherway decision

Position: Depends on the facts of a particular case

Reasons: na

25 November 1998 CTF Roundtable Q. 12, 9822340 - THIN CAPITALIZATION

Unedited CRA Tags
18(4) 96(1)

Principal Issues: Will RCT follow decision in Ontario Tax court re: Willdenburg?

Position: Yes. where facts are the same.

Reasons: Where there is a bona fide partnership and each partner is responsible for all P's debts joint and several then our 1992 R\T position would hold.

9 December 1998 TEI Roundtable, 9829820 - PART I.3 - PARTNERSHIP EARNINGS

Unedited CRA Tags
181(3) 181.2(3)

Principal Issues:
Treatment of undistributed partnership income for the fiscal period of the partnership that ends in the corporate partner’s taxation year as well as the treatment of distributions of current earnings to the corporate partner in the period that begins after the end of the partnership’s fiscal period but before the end of the corporate partner’s taxation year for Part I.3 purposes.

Position:
If such amounts are credited to the corporate partner’s retained earnings in accordance with GAAP, it is our view that such amounts would be included in the corporate partner’s taxable capital.

Reasons:
Legislation.

1 December 1998 TEI Roundtable, 9830080 - SAME-SEX PARTNERS, RPPS

Unedited CRA Tags
147.1

Principal Issues: Current position re pension benefits provided to same-sex spouses.

Position: Adhere to Rosenberg Decision.

Reasons: Effective April 23, 1998, Revenue Canada will register pension plans that provide survivor benefits for same-sex partners.

19 November 1998 TEI Roundtable, 9829940 - 1998 TEI CONFERENCE - SHELL CANADA

Unedited CRA Tags
245

Principal Issues: Department's position on Kiwi Loans following Shell Canada cas at Federal Court

Position: Will consider application of GAAR in future

Reasons: Avoidance Transaction

Technical Interpretation - Internal

23 December 1998 Internal T.I. 9826207 - R&D POOL

Unedited CRA Tags
37 85 85(1.1)

Principal Issues: can it be said that an amount in a R&D tax pool is eligible property
for purposes of a section 85 roll?

Position: No.

Reasons: Simply an amount that results from a provision of the Act that allows a
particular deduction.

23 December 1998 Internal T.I. E9826207 - R&D POOL

Unedited CRA Tags
37 85 85(1.1)

Principal Issues: can it be said that an amount in a R&D tax pool is eligible property
for purposes of a section 85 roll?

Position: No.

Reasons: Simply an amount that results from a provision of the Act that allows a
particular deduction.

17 December 1998 Internal T.I. 9822287 - STOP-LOSS RULE - MARK-TO-MARKET PROPERTY

Unedited CRA Tags
112(5.2)

Principal Issues:

1. Whether a disposition occurs when the issuer of shares held by a financial institution as mark-to-market property amalgamates with another corporation.

2. Whether dividends received on shares of the predecessor corporation (“old shares”) prior to amalgamation should be taken into account in the application of the stop-loss rule in subsection 112(5.2) to a subsequent disposition of shares of the amalgamated corporation (“new shares”).

Position:

1. It is our view that an amalgamation to which subsection 87(1) applies will result in a disposition of shares held by the financial institution as mark-to-market property for income tax purposes.

2. Given our position in 1) above, there is no requirement to take into account dividends received on the old shares in the application of the stop-loss rule to a disposition of the new shares.

Reasons:

14 December 1998 Internal T.I. E9829867 - RESP CONCERNS

Unedited CRA Tags
146.1

Principal Issues:

Various concerns with respect to RESPs

Position:

Provided answers that explained provisions of the Act and did not reply to questions relate to tax planning.

Reasons:

14 December 1998 Internal T.I. 9829867 - RESP CONCERNS

Unedited CRA Tags
146.1

Principal Issues:

Various concerns with respect to RESPs

Position:

Provided answers that explained provisions of the Act and did not reply to questions relate to tax planning.

Reasons:

1 December 1998 Internal T.I. 9829850 - PARTICIPATING PAYMENTS - INTEREST

Unedited CRA Tags
20(1)(c) 212(1)(b)

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Tax Executive Conference

Question XVII Participating Payments - Interest

Question

30 November 1998 Internal T.I. 9830237 - AT RISK RULES AND DEBT FORGIVENESS

Unedited CRA Tags
96(2.2) 80(15)

Principal Issues: Does subsection 80(15) election affect at risk rules.

Position: no. at risk rules applied first. Section 80(15) used to apply income inclusion to grind certain tax pools.

Reasons: analysis of law. see also finance tech notes

19 November 1998 Internal T.I. 9824666 - PENSION PLAN EMPLOYERS - SECTION 251

Unedited CRA Tags
251(1)

Principal Issues: Would a municipality be dealing at arm’s length with a corporation that is owned jointly by the municipality and other municipalities for purposes of 8503(3)(b).

Position: Possibly.

Reasons: Analysis of legislation and statutory documentation.

6 November 1998 Internal T.I. 9825006 - REIMBURSEMENT OF PENSION CONTRIBUTIONS

Unedited CRA Tags
6

Principal Issues:

In a particular situation if employees take a leave of absence, the employees are required to pay the employer’s share of RPP contributions but are subsequently reimbursed by the employer. Are the reimbursements by the employer treated as taxable benefits?

Position:

In general, yes.

Reasons:

4 November 1998 Internal T.I. E9825257 - TAXATION OF TRAINING ALLOWANCES

Unedited CRA Tags
56(1)(n) 56(1)(U)

Principal Issues: Taxation of Saskatchewan Training Allowances to Disabled Individuals.

Position: Question of fact.

Reasons: If the payments appear to be more in the nature of social assistance and are intended to replace current social assistance payments, then they should be taxable as social assistance under paragraph 56(1)(u). If the primary purpose is to further education then they should be taxable under 56(1)(n) of the Act.

4 November 1998 Internal T.I. 9818007 F - ÉQUIVALENT POUR CONJOINT 118(5)

Unedited CRA Tags
118(5) 118(1)b)

Principales Questions:

Suite à une ordonnance émise en janvier 1998, Monsieur est tenu de payer à Madame une pension alimentaire rétroactivement pour les mois de novembre et décembre 1997. La pension est effectivement payée en janvier 1998. Est-ce que Monsieur peut réclamer, à l’égard de l’enfant, le crédit équivalent pour personne entièrement à charge prévu à l’alinéa 118(1)b) de la Loi pour l’année d’imposition 1997, compte tenu du paragraphe 118(5) de la Loi.

Position Adoptée:

4 November 1998 Internal T.I. 9825257 - TAXATION OF TRAINING ALLOWANCES

Unedited CRA Tags
56(1)(n) 56(1)(U)

Principal Issues: Taxation of Saskatchewan Training Allowances to Disabled Individuals.

Position: Question of fact.

Reasons: If the payments appear to be more in the nature of social assistance and are intended to replace current social assistance payments, then they should be taxable as social assistance under paragraph 56(1)(u). If the primary purpose is to further education then they should be taxable under 56(1)(n) of the Act.

Ministerial Letter

14 December 1998 Ministerial Letter 9826898 - CLERGYMAN'S RESIDENCE

Unedited CRA Tags
8(1)(c)

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

XXXXXXXXXX

Dear XXXXXXXXXX:

Thank you for your letter of September 23, 1998, regarding your constituent’s concerns that Revenue Canada wants to change the clergyman’s residence deduction and restrict the kinds of donations that qualify for a charitable tax credit.